Mad-cow scare sends stocks lower

McDonald's, Wendy's, beef-related stocks tumble

MarkCotton

NEW YORK (CBS.MW) --U.S. stock market indexes ended the day close to their session lows as McDonald's, Wendy's and other beef-related stocks tumbled amid investor jitters over the surfacing of mad-cow disease in Washington state.

Worries over the long-term impact of the mad-cow scare completely overshadowed strong first quarter earnings results from chipmaker Micron Technology.

Analysts remain divided on the implications of the first case of mad-cow disease on the U.S. territory.

"We point out that the most recent [mad-cow] scare in May of this year [in Canada] caused a knee-jerk reaction but no real long-term impact on either stock prices or overall consumption of beef," said Harris Nesbitt analyst Matthew DiFrisco.

Tobias Levkovich at Citigroup sounded a note of caution.

"We believe the developments should not be viewed lightly as mad-cow was devastating to U.K. farmers in the 1990s and affected overall demand for beef and beef-related products," he said in a note to client.

Levkovich added that it took the U.S three months to ease restrictions on Canadian beef imports after its case of BSE.

Others said the resulting drop in beef prices could prove to be a positive. See story The Dow Jones Industrials Average
DJIA, -1.24%
closed down 36 points, or 0.3 percent, at 10,305. The Dow had posted gains in the prior six sessions. Of the Dow's 30 components, 23 suffered losses Wednesday.

The Nasdaq Composite
$COMPQ
lost 5.55 points, or 0.3 percent, to 1,969 and the S&P 500 Index
SPX, -1.54%
was off 2 points or 0.2 percent at 1,094.

In the broad market, the number of advancing stocks had a slight edge over decliners by a 15 to 14 ratio on the NYSE, but trailed by a 16 to 13 score on the Nasdaq exchange.

Volumes were light, with 515 million shares changing hands on the Big Board and 641 million shares turning over on the Nasdaq.

Within commodities, livestock futures on the Chicago Mercantile Exchange Cattle futures were halted at nearly 2 percent lower on the back of the mad-cow news and Japan's move to ban imports of U.S. beef.

The declines were at limit-down levels, or the maximum price decrease the exchange allows in one session.

February live cattle futures were down 1.5 cents, or 1.7 percent, at 89.175 cents a pound. January feeder cattle was down 1.5 cents, or 1.6 percent, at 93.725 cents a pound. Futures Movers. Elsewhere, crude futures added 91 cents to $32.86, helped by data that showed distillate inventories fell more than expected (read more), and gold futures edged up $1.20 to $412.80.

On the economic front, weaker-than-expected durable goods orders and a slowdown in the sale of new homes for November cheered the bond market. The yield on the 10-year Treasury note
TNX, -1.21%
declined 0.044 percentage points to 4.225 percent. See Bond Report.

The only mildly positive economic news was a small drop in first time claims for state unemployment benefits in the latest weekly statistics.

The U.S. dollar recovered slightly after hitting a fresh all-time low of 1.2470 in early trade, sparked by the disappointing economic data and by fears of trade-related repercussions of the mad-cow discovery. The dollar was up 0.5 percent at $1.2450. Against the Japanese yen, the buck dipped 0.1 percent against the yen to 107.26. (see Currencies).

Among the stocks impacted by the mad-cow scare, McDonald'sMCD, -0.64%
was the most high-profile casualty.

Shares of the fast food behemoth slumped $1.32, or 5.2 percent, to $23.96 to lead Dow decliners, off an a session low of $23.10.

Rival Wendy's
WEN, -1.76%
ended the day down $1.87 or 4.7 percent at $37.79.

Both hamburger chains issued statements saying their beef supply was not affiliated with the meat plants where the case of mad-cow disease was detected.

Tyson Foods was another loser, sliding $1.08 or 7.7 percent to $12.90.

Not at all food groups, however, took a drubbing. Meat processors with pork or poultry operations posted gains on investor hopes they could benefit from a rise in sales in those product lines. Among the most notable winners, Hormel
HRL, -1.43%
climbed 15 cents to $26.46, Cal-Maine Foods, a major egg supplier
CALM, -0.42%
jumped $3.23 or 10 percent to $35.13 while poultry producer Pilgrim's Pride
PPC, -2.03%
gained $1.79 to $16.85.

The mad-cow scare also benefited a number of stocks in the biotech sector specialized in diagnostic testing of the disease. Bio Laboratories
BIO, -2.13%
was the most notable winner, shooting up 20 percent to$59.82. Vi Technologies
VITX
another supplier of test for BSE, ran up 45 percent to $1.22. Also benefiting were Paradigm Genetics
PDGM
up 9 percent, and Orchid Biosciences
ORCH, +1.04%
up 11 percent. See Biotech Stocks.

In other stock news, General Motors
GM, -2.10%
was the most visible gainer on the Dow after UBS upgraded the stock. Shares in the carmaker ended up $1.37 at $53.35..

In the semiconductor space, memory chip maker Micron Technology
MU, -3.49%
rallied 2.1 percent to $13.44 after the company said late Tuesday that it broke even in its fiscal first quarter, vs. Wall Street expectations of a loss. See full story.

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